SB0137

SENATE BILL 137

55th legislature - STATE OF NEW MEXICO - second session, 2022

INTRODUCED BY

Gay G. Kernan and Roberto "Bobby" J. Gonzales

AN ACT

RELATING TO TAXATION; PROVIDING A DISTRIBUTION OF A CERTAIN AMOUNT OF THE STATE GROSS RECEIPTS TAX IMPOSED ON CERTAIN SERVICES; REQUIRING REPORTING OF THE LOCATION OF THE SELLER WHEN REPORTING GROSS RECEIPTS; MAKING AN APPROPRIATION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 7-1-6.4 NMSA 1978 (being Laws 1983, Chapter 211, Section 9, as amended) is amended to read:

"7-1-6.4. DISTRIBUTION--MUNICIPALITY FROM GROSS RECEIPTS TAX.--

A. [Except as provided in Subsection B of this section] A distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to each municipality in an amount, subject to any increase or decrease made pursuant to Section 7-1-6.15 NMSA 1978, equal to the product of the quotient of one and two hundred twenty-five thousandths percent divided by the tax rate imposed by Section 7-9-4 NMSA 1978 multiplied by the net receipts, except net receipts attributable to a nonprofit hospital licensed by the department of health, for the month attributable to the gross receipts tax from:

(1) business locations [(1)] within [that] the municipality,

[(2) on land owned by the state, commonly known as the "state fairgrounds", within the exterior boundaries of that municipality;

(3) outside the boundaries of any municipality on land owned by that municipality; and

(4) on an Indian reservation or pueblo grant in an area that is contiguous to that municipality and in which the municipality performs services pursuant to a contract between the municipality and the Indian tribe or Indian pueblo if:

(a) the contract describes an area in which the municipality is required to perform services and requires the municipality to perform services that are substantially the same as the services the municipality performs for itself; and

(b) the governing body of the municipality has submitted a copy of the contract to the secretary.

B. If the reduction made by Laws 1991, Chapter 9, Section 9 to the distribution under this section impairs the ability of a municipality to meet its principal or interest payment obligations for revenue bonds outstanding prior to July 1, 1991 that are secured by the pledge of all or part of the municipality's revenue from the distribution made under this section, then the amount distributed pursuant to this section to that municipality shall be increased by an amount sufficient to meet any required payment, provided that the distribution amount does not exceed the amount that would have been due that municipality under this section as it was in effect on June 30, 1992] not including services for which a distribution is made to any municipality pursuant to Paragraph (2) of this subsection; and

(2) locations of sellers within the municipality for services as reported pursuant to Section 7-1-14 NMSA 1978, not including the following services:

(a) construction services and construction-related services performed for a construction project in New Mexico; and

(b) services with respect to the selling of real estate located in New Mexico.

[C.] B. A distribution pursuant to this section may be adjusted for a distribution made to a tax increment development district with respect to a portion of a gross receipts tax increment dedicated by a municipality pursuant to the Tax Increment for Development Act.

[D.] C. As used in this section:

(1) "nonprofit hospital" means a hospital that has been granted exemption from federal income tax by the United States commissioner of internal revenue as an organization described in Section 501(c)(3) of the Internal Revenue Code; and

(2) "within the municipality" means a location:

(a) within a municipality;

(b) on land owned by the state, commonly known as the "state fairgrounds", within the exterior boundaries of a municipality;

(d) on an Indian reservation or pueblo grant in an area that is contiguous to a municipality and in which the municipality performs services pursuant to a contract between the municipality and the Indian tribe or Indian pueblo if: 1) the contract describes an area in which the municipality is required to perform services and requires the municipality to perform services that are substantially the same as the services the municipality performs for itself; and 2) the governing body of the municipality has submitted a copy of the contract to the secretary."

SECTION 2. Section 7-1-14 NMSA 1978 (being Laws 2020, Chapter 80, Section 1) is amended to read:

"7-1-14. [BUSINESS LOCATION INSTRUCTIONS FOR PURPOSES OF] SOURCING RULES FOR REPORTING GROSS RECEIPTS AND USE--LOCATION-CODE DATABASE AND LOCATION-RATE DATABASE.--

A. For purposes of the Gross Receipts and Compensating Tax Act, Interstate Telecommunications Gross Receipts Tax Act, Leased Vehicle Gross Receipts Tax Act and any act authorizing the imposition of a local option gross receipts or compensating tax, a person that has gross receipts and a person using property or services in New Mexico in a taxable manner shall report [the gross receipts to] the proper business location and the location of the seller for a person that has gross receipts, as provided in this section.

B. The business location for gross receipts from the sale, lease or granting of a license to use real property located in New Mexico, and any related deductions, shall be the location of the property.

C. The business location for gross receipts from the sale or license of tangible personal property, and any related deductions, shall be at the following locations:

(1) if the property is received by the purchaser at the New Mexico [business] location of the seller, the location of the seller;

(2) if the property is not received by the purchaser at [a business] the location of the seller, the location indicated by instructions for delivery to the purchaser, or the purchaser's donee, when known to the seller;

(3) if Paragraphs (1) and (2) of this subsection do not apply, the location indicated by an address for the purchaser available from the business records of the seller that are maintained in the ordinary course of business; provided that use of the address does not constitute bad faith;

(4) if Paragraphs (1) through (3) of this subsection do not apply, the location for the purchaser obtained during consummation of the sale, including the address of a purchaser's payment instrument, if no other address is available; provided that use of this address does not constitute bad faith; or

(5) if Paragraphs (1) through (4) of this subsection do not apply, including a circumstance in which the seller is without sufficient information to apply those standards, the location from which the property was shipped or transmitted.

D. The business location for gross receipts from the lease of tangible personal property, including vehicles, other transportation equipment and other mobile tangible personal property, and any related deductions, shall be the location of primary use of the property, as indicated by the address for the property provided by the lessee that is available to the lessor from the lessor's records maintained in the ordinary course of business; provided that use of this address does not constitute bad faith. The location of primary [business location] use shall not be altered by intermittent use at different locations, such as use of business property that accompanies employees on business trips and service calls.

E. The business location for gross receipts from the sale, lease or license of franchises, and any related deductions, shall be where the franchise is used.

F. The business location for gross receipts from the performance or sale of the following services, and any related deductions, shall be at the following locations:

(1) for professional services performed in New Mexico, other than construction-related services, or performed outside New Mexico when the product of the service is initially used in New Mexico, the location of the performer of the service or seller of the product of the service, as appropriate;

(2) for construction services and construction-related services performed for a construction project in New Mexico, the location of the construction site;

(3) for services with respect to the selling of real estate located in New Mexico, the location of the real estate;

(4) for transportation of persons or property in, into or from New Mexico, the location where the person or property enters the vehicle; and

(5) for services other than those described in Paragraphs (1) through (4) of this subsection, the location where the product of the service is delivered.

G. Except as provided in Subsection H of this section, the business location for uses of property or services subject to the compensating tax shall be [reported at] the [business] location at which gross receipts would have been required to be reported had the transaction been subject to the gross receipts tax.

H. If a person subject to the compensating tax can demonstrate that the first use upon which compensating tax is imposed occurred at a time and place different from the time and place of the purchase, then the business location for the compensating tax shall be [reported at] the [business] location of the first use.

[I. The secretary shall designate codes to identify the business locations for a person's gross receipts, or use for purchases subject to the compensating tax, and deductions related to those receipts or that use shall be reported.

J.] I. The secretary shall develop a location-code database that provides the business location codes and location of seller codes designated by the secretary for purposes of reporting pursuant to [Subsection I of] this section. The secretary shall also develop and provide to taxpayers a location-rate database that sets out the tax rates applicable to business locations within the state, by address, and sellers who properly rely on this database shall not be liable for any additional tax due to the use of an incorrect rate.

[K.] J. As used in this section:

[(1) "business location" means the code designated by the department to identify business locations and required to be used to report the gross receipts, or use for purchases subject to the compensating tax, and deductions related to those receipts or that use;

(2)] (1) "gross receipts" means, as applicable, "gross receipts" as used in the Gross Receipts and Compensating Tax Act and the Leased Vehicle Gross Receipts Tax Act and "interstate telecommunications gross receipts" in the Interstate Telecommunications Gross Receipts Tax Act;

[(3)] (2) "in-person service" means a service physically provided in person by the service provider, where the customer or the customer's real or tangible personal property upon which the service is performed is in the same location as the service provider at the time the service is performed; and

[(4)] (3) "professional service" means a service, other than an in-person service, that requires either an advanced degree from an accredited post-secondary educational institution or a license from the state to perform."

SECTION 3. APPROPRIATION.--One million dollars ($1,000,000) is appropriated from the general fund to the taxation and revenue department for expenditure in fiscal years 2022 and 2023 to implement the provisions of this act. Any unexpended or unencumbered balance remaining at the end of fiscal year 2023 shall revert to the general fund.

SECTION 4. EFFECTIVE DATE.--The effective date of the provisions of Sections 1 and 2 of this act is July 1, 2022.

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